The post-Civil War reconciliation between the North and the South is a very rare event
in the history of civil wars. The South was thoroughly beaten. Top generals, particularly Robert E.
Lee, saw further fighting as "useless effusion of blood." There was no call by top Confederate
leaders for continuing the fight with the type of bushwacking that occurred in Missouri and
Kansas. Reconstruction is often thought of as harsh, but compared to the standards of history
Confederates were by and large treated well after the Civil War. Within a decade or so of the end
of the Civil War, conservative white elites had established political, economic and social
dominance in the South. They had lost their "slave property" and the "government of our own."
They could never get back slavery, and a government of their own was not worth fighting for.
There was little reason for the kind of persistent low-level guerilla warfare that often occurs after
civil wars, or the organization of a succession of rebellions.

Because the conflicts that led to the American Revolution mainly arose from
constitutional issues, the history of these conflicts offers lessons for the design of the new
European Union constitution. One lesson is the importance of avoiding needless conflicts
between federal and member-state governments. In particular, forcing decisions on where
sovereignty lies may cause great conflict. Another lesson is that a federal system depends on
good will among the federal and member-state governments, and because this good will is easily
dissipated, efforts should be made to nurture it. Federal exercise of power will often alienate
member states; thus, a sensible strategy is to grant the federal government only the minimal
powers that a strong consensus agrees it must have, and to change these powers only by strong
consensus. Removing "democratic deficits" may not be sufficient in many cases to give
legitimacy to exercise of federal power; minorities may require protection by constitutional
limits on federal powers.

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The paper argues that society should vary the sanction applied to a
criminal defendant with the weight of the evidence against him or her.
This is optimal when it is costly for society to apply sanctions, since it can
yield the same degree of deterrence while requiring fewer resources to be
spent on sanctioning. Furthermore, when the unfairness of convicting an
innocent defendant increases with the size of the sanction, this provides a
further rationale for graduating sanctions with the probability of guilt.
Some objections are briefly discussed, mainly that it is inherently unfair
to apply different sanctions on people, who have committed the same
offense, and that the legal system will lose legitimacy if it allows sanctions
to vary in the way suggested.

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The democratic deficit in the so-called bargaining democracy provides the
motivation for constitutional efforts to limit the ability of different groups to form
coalitions that are able to grant benefits to themselves through legislation that more
or less directly benefit identifiable groups. A constitutional hierachy of laws that
stand in conflict is proposed. In this hierarchy more "rule-oriented" legislation
dominate less "rule-oriented" legislation. The main purpose of the proposal is to
create a momentum of the political process towards more rule-oriented policy
actions and legislation, and to inspire the policy debate to focus on principles and
rules to an increasing extent. At the same time, the difficulty of defining a rule as
opposed to an outcome-oriented directive is avoided by limiting the task of a
constitutional court to simply rank conflicting policy actions with respect to the
degree actions satisfy criteria for rules.

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Abstract: This article analyzes the conflict of interests between shareholders and
other stakeholders, including when such conflicts of interests may arise. It is argued
that shareholder value cannot be justified simply by referring to any prerogative
property rights of the shareholders. Instead, shareholder value coincides with the
efficient hypothetical perfect contract. However, due to contractual failures in certain
bargain situations, management may be unable to "internalize the firms externalities".
This means that in these situations there is a tradeoff between a broad duty of loyalty
for management in listed firms and other traditional remedies. The theoretical insights
are applied on a case from the Danish Supreme Court (Louis Poulsen A/S) where the
interests of the stakeholders were decisive. However, it is shown that the verdict may
instead harm the relevant stakeholders illustrating how cautious the legal system
should use a doctrine based on the "company’s interests". In addition, the notion of a
firm’s social responsibility is critically evaluated together with the associated pitfalls
of accepting this concept.

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In this paper we set up a model of start-up finance under double moral hazard.
Entrepreneurs lack own resources and business experience to develop their ideas.
Venture capitalists can provide start-up finance and commercial support. The effort
put forth by either agent contributes to the firm’s success, but is not verifiable. As
a result, the market equilibrium is biased towards inefficiently low venture capital
support. The capital gains tax becomes especially harmful, as it further impairs
advice and causes a first-order welfare loss. Once the capital gains tax is in place,
limitations on loss off-set may paradoxically contribute to higher quality of venture
capital finance and welfare. Subsidies to physical investment in VC-backed startups
are detrimental in our framework.
Keywords: Venture capital, capital gains taxation, double moral hazard.
JEL-Classification: D82, G24, H24, H25

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We show that when the researcher’s (observable but not contractible) contribution
to innovation is crucial, a covenant not to compete (CNC) reduces effort and profits
under both spot and relational contracts. Having no CNC allows the researcher to
leave for a rival. This alleviates a commitment problem by forcing the firm to reward
a successful researcher. However, if the firm’s R&D investment mainly matters,
including a CNC in the contract is optimal, as it ensures the firm’s incentives to
invest.
JEL Codes: J3, K2, L14, O31, O34.
Keywords: Innovation, intellectual property rights, labor contracts, poaching, relational
contracts, start-ups.

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This article studies the involuntary transfer of property rights by theft - a topic almost unexplored in the law and economics literature. The question is whether a buyer of a stolen good should obtain title to the good if he/she has purchased it in good faith. As described in the article different jurisdictions treat this issue differently. The traditional theory suggests that there is a tradeoff between the costs of protecting the good and the costs of verifying the ownership. However, as shown, the rule of law concerning this issue significantly affects parties’ incentives. Specifically, it is shown that a rule of law where good faith is irrelevant in determining the issue of property rights Pareto dominates a rule where good faith may protect an innocent buyer. Thus, an owner of an asset will spend more resources on protecting his property and potential buyers will incur higher costs in order to verify the ownership when good faith is decisive for the transfer of property rights.
JEL Classification: K11, K14 and K42
Keywords: property right law, theft, good faith and game theory

Patent indicators are widely used to assess innovative output. Despite the
large variety of empirical studies in the field, however, the precise meaning
of these indicators and their obvious relation to patent value is still based on
assumptions and intuitions. This paper provides the first empirical test of
patent indicators as value measures in the structural form. It disentangles the
different effects reflected in patent indicators and enhances our
understanding why inventions are valuable at all. Using a newly assembled
data set on European polymer patents, current assumptions on the
innovation incentives set by patentability requirements (novelty, inventive
activity) are tested. The estimations are carried out using a custom-tailored
two stage discrete choice probit model yet unknown in the literature. The
results support the assumptions that novelty and inventive activity enhance a
patent’s value. They confirm the importance of backward citations, family
size, and forward citations as va lue indicators. However, they expand on
and partly break with the respective explanations why patent indicators
correlate with profitability.

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A comparative analysis of the explanatory power of accounting and patent information for the market values of German firms

Ramb, Fred; Reitzig, Markus(København, 2004)

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Abstract:

We present a theoretical and empirical analysis of the fitness of national German
(German Commercial Code – Handelsgesetzbuch (HGB)) and international (IAS and
US-GAAP) accounting information, as well as European patent data to explain the
market values of German manufacturing firms. For the chosen volatile period from
1997 to 2002, cautious national accounting information does not correlate with the
firms’ residual market values (RMV). International accounting information makes no
meaningful contribution to explaining firms’ RMV and seems to measure overinvestment
only. Finally, patents counted at the individual country level correlate with
the firms’ RMV.
Keywords: Accounting standards, investor information, market value,
patents
JEL-classifications: D82, M40, M41, K11

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A Comparative International Analysis of Innovation Incentives from Patent Indemnification Rules

Reitzig, Markus; Henkel, Joachim; Heath, Christopher(København, 2002)

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Abstract:

Abstract:
This paper contributes to the fundamental discussion of setting optimal
liabilities in restitution law by analyzing the effects that the existing
multitude of indemnification rules for patent infringements have on
innovative and imitative activity. From a theoretical legal standpoint, the
choice of patent law is particularly enlightening due to its hybrid public and
private nature. From an economic perspective its relevance lies in regulating
the driving forces of welfare in highly industrialized societies. Our analysis
of regulations from six different jurisdictions (US, JP, DE, UK, FR, NL)
reveals that from a scholarly standpoint none of the regulations sets optimal
liabilities in general. Our major finding is that an expectation damage rule
based on a renegotiation outcome from an ex-ante perspective (falling in
between the generic legal notions of ‘lost profits’ and ‘infringer’s profits’)
between licensor and licensee appears optimal in patent infringement cases
to avoid dynamic inefficiencies. The result is intuitive, however, was not
predicted by the existing literature on indemnification law.
Keywords: Patents, litigation, damage awards, innovation,
infringement
JEL-Classifications: K41,L00, L20